Financial experts at the Personal Money Network recommend that anyone who doesn’t have an excellent credit score should start working on improving it as soon as possible. If you’re like most people, there is always room to grow so here are a few tips that can help you to get that number to move in the right direction.
1. Make Payments on Time
Credit experts strongly recommend that you always make sure your bills are paid in a timely manner. One of the biggest influencers of your FICO score is your payment history as it reflects your ability to pay your bills responsibly. A consistent record of timely payments is a good indicator that the same habits will continue in the future. Even late payments on small bills can have a negative impact so exercise due diligence and pay everything by the due date or sooner, if possible.
2. Use Your Opt-In Option
Not all companies you pay will report to the same credit bureau, some don’t report at all. One credit bureau, Experian, has a new opt-in feature called Experian Boost that allows them to link to your bank account and identify regular payments for other bills you pay like utilities and cell phone charges. These can be incorporated into your credit score in real time and if you’ve been paying consistently on time, can boost your credit score.
3. Keep Everything in Balance
Just because you have a credit limit doesn’t mean you should use all of it. Your credit score factors in your debt-to-credit ratio (DTI) so you need to make sure that your debt is considerably lower than your current credit rating. In determining your FICO score, some agencies want to see less than 10% of the credit limit in use at any given time. The higher your debit to limit ratio is the fewer points you will have added to your score.
4. Pay Off Debt When You Can
Your credit utilization ratio is determined by taking the sum of all our credit balances and then dividing it by your current credit limit. Lenders will look at this ratio to see just how much credit you’re using at any given time. If you make it a habit of paying off your bills regularly, your credit ratio will show that you’re not maxing out your limit each month. Lenders typically look for a ratio that falls below 30%. By keeping those balances low you can boost your score.
5. Don’t Rush to Have Old Debts Removed
Seeing the words “paid in full” on your account is a good thing. It can be difficult to spend years paying off a bill and once it’s gone, it is only natural to want it removed from your report. However, keeping it on your report can actually help improve your score. It shows that you have been able to completely pay off a debt over a period of time and have a positive impact on your score.
6. Apply for New Credit Only When Needed
Don’t get in the habit of opening an account just to add more credit. Too much credit can be just as harmful as too little. Even applying for too many different accounts can be damaging to your credit report. Lenders see it as a temptation to overspend and amass unnecessary debt.
7. Keep a Careful Eye on Your Credit
While all credit bureaus will try to be diligent in reporting your credit activity, errors will still happen. You should always check your credit report so you can catch any mistakes that may occur. This will enable you to spot any signs of possible identity theft, which can be extremely damaging to your score. Checking your credit report every few months could make a huge difference in how your score is calculated.
Your credit score can either open or close doors for you. If you are diligent in monitoring your credit on a regular basis, paying bills on time, and avoiding overspending, it could be a huge benefit to your financial future.
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